Portfolio Review 4 of 5
Another
invaluable use of REFS on line is for portfolio reviews.
Every month it is well worthwhile reviewing each and every
share in your portfolio to see if there has been a major
change that may have gone unnoticed on a more day-to-day
basis.
Check the relative strength during the
previous month. If this is poor, then check the last three
months and the last year. A quick look at the OUTLOOK and NEWSFLOW indicates
whether there have been any price-sensitive announcements.
The
panel of brokers' estimates, recommendations and the consensus
should always be checked in detail. The plus and minus signs
indicate the estimates that have been changed during the
month.
The lines
at the bottom, showing the one-month and three-month changes
indicate the overall percentage change during the previous
month and the previous three months.
A trend
of downward revisions is very bad news, especially if it
is accompanied by poor relative strength. This is usually
enough to consider selling immediately.
The KEY
STATISTICS should always be reviewed because there
are so many variables involved: the share price, growth
rate and EPS forecast are of particular
importance.
For example,
a substantial rise in the share price during the month, coupled
with a small downward revision of the earnings forecasts
making up the consensus value, can impact the PER and
Growth statistics and consequently dramatically change the PEG.
A useful extra discipline is to prepare
a master portfolio (every month or every three months) showing
the average of each key statistic in your portfolio. This
is simply constructed by listing each share together with
its key statistics, adding the columns, and then dividing
by the number of different shares in the portfolio.
To be
more sophisticated, weighting of the portfolio can be brought
into the equation if required. The resultant average figures
can then be compared with each constituent of the existing
portfolio and, equally importantly, with new candidates.
This helps to highlight if a particular
share is a worthwhile hold, buy or sell.
The SHARE
CAPITAL, HOLDINGS panel tells you immediately if
any of the directors have been buying or selling any shares.
Institutional dealings are also of interest, especially
if a really major shareholder has begun to lessen its stake
and might have many more shares left to sell.
The other
key statistics, such as gearing, should also be quickly scanned
to make sure that there has been no major change during
the month.
Finally, have a look at the tables in
REFS on line to see if any of your shares have had a major
change of relative position during the month.
Sometimes,
changes are imperceptible on a day-to-day basis, so it makes
sense to make sure, for example, that their PERs are
not creeping into the high end of the tables - a sign that
they are becoming favourites of the market.
Also
have a close look at each of your shares by filtering by
sector. Sometimes one is unaware of a gradual change taking
place in a sector as a whole. It is advisable to review
your shares regularly in their natural context (i.e. their
sector) to get a fix on their relative attractions.
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